Market review

• Asian equities took a beating on Friday as most of the key indices were traded in the negative territory as Samsung Group was in focus after its Jay Y. Lee was arrested in an alleged corruption; Shanghai Composite Index fell 0.85% at 3,202.08 (+0.17% wow), while Nikkei 225 and HSI declined 0.58% and 0.31% at 19,234.62 pts (-0.74% wow) and 24,033.74 pts (+1.95% wow) respectively.

• Meanwhile, shares on Bursa Malaysia trended sideways – the FBM KLCI ended marginally higher by 0.01% at 1,707.68 pts (+0.51% wow) after hitting intra-day high of 1,711.15 pts. Market breadth was fairly neutral as decliners were ahead of advancers by 431-to-427 stocks.

• On the overseas markets, the Dow managed to inch up marginally by 0.02% at 20,624.05 pts (+1.75% wow), forming the seventh consecutive day of gains. Also, S&P500 and Nasdaq advanced for a record closing led by consumer staples sector.

Technical view

KLCI to trend sideways given lack of fresh catalyst amid results reporting

• After trading towards the upper Bollinger band, the FBM KLCI has been on a pullback formation. The MACD Histogram has extended another red bar. Both the Stochastics and RSI oscillators are turning downwards – indicating a weakness in the short-term momentum. The FBM KLCI’s upside is likely to be capped around 1,720- 1,730. Meanwhile, support will be anchored around 1,700.

Market outlook

• Based on the recent trading activities, which most of the overseas indices trended on a mild pullback formation, we opine that investors are keeping an eye on economic policies that will be revealed by Donald Trump over the near term. Also, traders will be focusing on the final two weeks on the reporting season, coupled with the Fed’s meeting minutes that will be released on Wednesday.

• Similarly, sentiments on the FBM KLCI are likely to stay sideways without any fresh catalyst in the market. However, small caps index might be resuming its uptrend formation once the index surges above the 16,100 level after taking a pause last week.

• Trading Buy-GADANG. We see limited downside risks as supported by netcash/share of 10.4sen (equivalent to 9.4% of market cap) and potential jobs win in its bidding of the MRT line 2, LRT line 3 and hospital projects. A decisive breakout above RM1.10 (downtrend line) will spur prices higher towards RM1.13-RM1.20 levels, followed by the long term target at RM1.31. Key supports are RM0.99-RM1.03. Cut loss at RM0.98.

• Closed positions. We had closed our position on TNLOGIS (3.1% gain) and AJIYA (8.6% gain).

Source: Hong Leong Investment Bank Research - 20 Feb 2017